German telecom giant Deutsche Telekom confirmed Wednesday that it has signed an agreement that will merge its subsidiary – T-Mobile USA, America's fourth-largest wireless operator – with MetroPCS, the fifth biggest. DT says the deal, if it gets regulatory approval, will "create the leading value carrier in the U.S. wireless marketplace." Boards of both companies have approved the proposed merger.
The financials looks like this: MetroPCS will declare a one-for-two stock split, make a cash payment of $1.5 billion to its shareholders, and acquire all of T-Mobile's capital stock by issuing to DT 74 percent of MetroPCS' common stock. Deutsche Telekom will roll its existing intercompany debt into new %15 billion senior unsecured notes of the combined company, provide the combined company with a $500 million unsecured revolving credit facility and provide a $5.5 billion backstop commitment for certain MetroPCS third-party financing transactions.
The combined company will carry the T-Mobile name, and have approximately $25 billion in revenue and $6.3 billion in profit, DT said. It's expected to "deliver an enhanced customer experience through a wider selection of affordable products and services, deeper network coverage and a clear-cut technology path to one common LTE network." It's estimated to have a combined 42.5 million subscribers – that's a little less than half the number of AT&T and Verizon Wireless, which each top 90 million.
“The T-Mobile and MetroPCS brands are a great strategic fit – both operationally and culturally," said René Obermann, CEO of Deutsche Telekom. "The new company will be the value leader in wireless with the scale, spectrum and financial and other resources to expand its geographic coverage, broaden choice among all types of customers and continue to innovate, especially around the next-generation LTE network. We are committed to creating a sustainable and financially viable national challenger in the U.S., and we believe this combination helps us deliver on that commitment."
T-Mobile expects to strengthen its position in the market by combining spectrum with MetroPCS; increasing scale to secure more compelling handsets, content and apps; capitalize on prepaid offerings; and more.
“The combination with MetroPCS is another logical and significant step that will accelerate our Challenger Strategy and enable us to deliver amazing, affordable and trusted 4G services, while providing opportunities to expand geographic territories and serve more customers," said John Legere, president and CEO of T-Mobile.